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5 Oct 2016 | Annual reports | Corporate reporting | Jack Craze

Annual Reports: How to share good and bad news

They say honesty is the best policy. And this is never truer than in an annual report, the ultimate aim of which is to inform and build trust and confidence among investors to secure repeat business, and to engage with wider stakeholders in order to achieve social acceptance.

In 2006, the average report was 85 pages long, and today they are over 50% longer. This increase is down to the growing complexity of regulations. There’s simply more to cover, and it’s essential that businesses reveal both the successes and challenges of the past year. So how do you impart hard truths without materially damaging your company’s prospects? Here are our top tips.

Sharing bad news

From financial crises to health and safety mishaps, there’s a whole host of potentially serious and sensitive scenarios that you may need to disclose in your company’s annual report. But while you need to be honest and transparent, you don’t want to set off too many alarm bells among your stakeholders. It’s a tricky but achievable balance.

Tone – How you deliver the news is the trick to instilling confidence in your stakeholders. Stick to the three Cs – concise, compelling and clear, to create a balanced, honest tone that won’t alienate your readers. Remember, it’s not just your stakeholders who may read the report, so keep the language accessible at all times, avoiding jargon.

Structure – How you structure your report can make a huge impact on how the news is received. Starting with the good and then the bad can leave a negative lasting impression, while the opposite can undermine the bad news. You should try to intertwine the positive and the negative, and structure it with topics where you talk about both together.

Succinct – In response to stakeholder demands for shorter reports, there have been numerous debates and publications aimed at encouraging companies to ‘cut through the clutter’ in corporate reporting. If you have something to say, then say it. Keep your sentences short and succinct and get to the point quickly. What’s more, a shorter, snappier report resonates more with the sustainability principles of increased efficiency and waste reduction.

Embrace accountability – admitting when things have gone wrong and acknowledging errors or misjudgements will help to demonstrate genuine accountability, which in turn will lend your report integrity and credibility. Above all, don’t try to put a positive spin on poor performance: the numbers don’t lie, and attempts to whitewash or greenwash a poor show will undermine your reporting credentials.

Stick to relevant material – A recent survey of 290 investment professionals found that 55% believed financial reports omit important information. In order to build trust and understanding, make sure you focus on the most material or relevant information – stick to the facts that matter most to your stakeholders.

Pre-empt questions – Plan ahead and think about the questions your readers may ask. You can answer these in your report, demonstrating that you understand their interests and concerns.

Look ahead – Rather than trying to find a silver lining, it’s often best to look ahead and explain what’s coming next. Tell your stakeholders that you’re prepared for the future and what you envisage happening to restore their confidence in your business. These few lines will demonstrate that your business is proactive.

Sharing good news

It’s a common misconception that sharing good news is the easy bit. While it may seem that your successes are exactly what your stakeholders want to see, the last thing they want to hear is arrogance. And it’s not an easy balance to achieve.

Tone – You don’t want your annual report to sound like it’s been put together by a marketing department. It’s an important document that should have authority. Even when you’re sharing good news, this should not be dressed up in fancy, highfalutin prose. To avoid sounding too celebratory or arrogant, steer clear of puffed-up, self-congratulatory language. The last thing you want is to sound like you’re patting yourselves on the back.

Stick to the facts – Trust in the intelligence of your reader to know when good news is good news. The survey mentioned above found that 60% of investment professionals believed that financial reports contain too much irrelevant information. You don’t need to tell them that you’ve had hundreds of successes and smashed multiple targets, they will get this from the facts.

Create a story – One way to avoid any trumpet-blowing is to create a narrative around overcoming challenges. Hard work is much easier to praise than luck, so show how well your team has done.

Include quotes – Ask your clients and staff if they would be happy to have their quote written in your annual report. You can either interview them and write it up or ask them to submit one themselves. Quotes give authenticity to your report and it’s much more humble for someone else to sing your company’s praises rather than you.

End with a vision – When sharing good news, it’s a good idea to include a vision for the future. This gives you an opportunity to show your readers that you’re still working hard and don’t take success for granted.

Time to share your company’s performance? Get in touch to learn more about Stratton Craig’s annual reporting expertise and how we can help your business set the right tone for corporate communications.